Gold price traded with a negative bias on Thursday as the FOMC minutes from last month’s meeting indicated a more hawkish stance. The cautious approach of the US Fed to hold its restrictive policy for longer has boosted the Greenback and exerted selling pressure on the gold price. Investors are closely watching the first reading of US PMI data for May, as a weaker reading may trigger hope for Fed rate cuts and support gold. Geopolitical tensions, uncertainties, and sticky inflation could also support the precious metal and cap the downside in the near term. In addition to the PMI data, other key indicators such as the Chicago Fed National Activity Index, weekly Initial Jobless Claims, New Home Sales, and Fed’s Bostic will also be in focus.
Daily Digest Market Movers: Gold price remains sensitive to the Fed’s hawkish remarks. The FOMC minutes released on Wednesday indicated a lack of progress towards the Committee’s 2 percent inflation target. Investors have priced in nearly a 60% chance of the first rate cut to happen in September and two reductions before the end of the year. The preliminary reading of US S&P Global Manufacturing and Service PMI is expected to remain unchanged in May. The People’s Bank of China has been the largest buyer of gold among its worldwide counterparts, adding 225 tonnes to its reserves last year.
Gold price has kept a bullish stance on the daily chart, with the price trading softer but remaining above the key 100-period EMA. The RSI holds above the bullish zone near 56.10, indicating buyer support for the time being. However, a bearish divergence has formed as the price hit an all-time high on May 20 while the RSI indicator formed lower highs. This suggests that there may be a correction or consolidation in the near term. The key resistance level for gold is near the upper boundary of the Bollinger Band and an all-time high of $2,450, with a break above potentially exposing the $2,500 mark. On the downside, support levels include the low of May 13 at $2,332 and the lower limit of the Bollinger Band at $2,270.
The US Dollar has strengthened this week against currencies such as the Euro, British Pound, Canadian Dollar, Australian Dollar, Japanese Yen, New Zealand Dollar, and Swiss Franc. The USD was strongest against the Australian Dollar, while the Euro, GBP, and CAD all saw percentage decreases compared to the USD. The heat map shows the percentage changes of major currencies against each other, with the base currency on the left column and the quote currency on the top row.
Overall, the gold price remains sensitive to the Fed’s stance on monetary policy, with a more hawkish approach potentially limiting the precious metal’s upside. Investors are closely monitoring key economic indicators such as the US PMI data to gauge the potential for Fed rate cuts. Geopolitical tensions and uncertainties, as well as sticky inflation, could continue to support the gold price in the near term. Technical analysis suggests a bullish stance for gold on the daily chart, with key resistance and support levels to watch. The US Dollar has shown strength against major currencies this week, further impacting the gold market.
